Airline shares tumble as new Covid variant triggers travel restrictions

Airline and other travel shares tumbled on Friday after the UK and EU moved to introduce restrictions on travel from southern African countries to try to stop the spread of a new coronavirus variant.

Shares in International Airlines Group, which owns British Airways, fell 14 per cent, while easyJet and Lufthansa each dropped more than 10 per cent. In New York, United, American and Delta each fell 13 per cent in morning trading.

The sell-off also affected the wider travel industry. Shares in hotel group Hilton fell 8 per cent, while cruise operator Carnival dropped 14 per cent and aircraft manufacturer Airbus lost more than 11 per cent.

The return of travel restrictions and the prospect of a worrying mutation is a significant blow to the industry, which had been recovering steadily over the past six months.

Johan Lundgren, easyJet chief executive, said airlines were waiting to see how quickly the new strain spread, and how effective current vaccines were against it.

Travel companies would need to “learn to live with” bouts of uncertainty when new variants were identified, he told the Financial Times.

“I don’t think it is a surprise we are seeing these kind of things . . . we were always quite clear on the fact we didn’t think the recovery would be straightforward, that these things could happen,” Lundgren said.

Late on Thursday, the UK placed six countries — South Africa, Botswana, Namibia, Zimbabwe, Lesotho and Eswatini — on its travel red list, while the European Commission on Friday said it would propose to ban travellers from the region.

Sajid Javid, UK health secretary, raised the prospect of expanding travel bans, and said ministers were in “live discussions” about adding more countries to the red list.

Israel and Singapore were among the other countries to tighten controls on arrivals from the region.

Scientists are increasingly worried about a surge in cases caused by the heavily mutated B.1.1.529 variant of the Sars-Cov-2 virus, fearing that it is more transmissible and better at evading vaccines than the dominant Delta variant.

Border closures and testing requirements were likely to make a return if vaccines were less effective, said Andrew Lobbenberg, an aviation analyst at HSBC.

“Travel volumes would fall and the recovery of the industry be deferred until new effective vaccines are developed and deployed. Conversely, if existing vaccines are deemed relatively effective, then the prospects for global travel should recover rapidly,” he said.

Airlines and other travel shares had already been under pressure this month after several European governments introduced new local lockdowns following a wave of infections caused by the Delta variant.

Southern Africa is a small part of European airline networks: BA had been flying two daily flights to South Africa, and Virgin Atlantic one.

But Mark Simpson, an aviation analyst at Goodbody, said the reaction “highlights the fragility of the situation” for the industry.

The declines took easyJet, IAG and Carnival shares to around their lowest levels since the discovery of vaccines a year ago.

Additional reporting by Ian Johnston

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